Memorial, Foundation sever some ties

At issue is a lab fee increase request by South Bend Medical officials.

At issue is a lab fee increase request by South Bend Medical officials.

April 20, 2007|HEIDI PRESCOTT Tribune Staff Writer

SOUTH BEND -- A stalemate in contract negotiations, mainly concerning a proposed laboratory fee increase, means two long-time local health care associates could sever most, if not all ties, this summer. South Bend Medical Foundation already has decided to discontinue many lab services it currently provides Memorial Health System and Hospital in South Bend on July 1. It has meant financial concern for the Foundation, which could lose $14 million in revenue from Memorial Hospital. And it has sent Memorial to seek assistance from a consulting firm to help the hospital quickly assemble an in-house laboratory, as it promises uninterrupted services no matter the result of future discussions. Though Foundation officials already have decided to end some lab services, it remains to be seen if the hospital and Foundation can agree upon blood bank, pathology and reference lab service fees. The hospital and medical staff have agreed a relationship should continue with the Foundation. The Foundation believes the possibility of an agreement for some services still exists, but it wants hospital officials to be open to negotiate on cost. But hospital officials said they will not accept a contract that calls for a 3 percent increase each year for the next five years. "It will be very difficult for Memorial Hospital to provide those services on July 1 if the South Bend Medical Foundation pulls out. The clock is running," said a concerned Dr. Gerard Duprat, president of the medical staff at Memorial. "Is this what we want to do for our patients in this community?" *** Most lab work South Bend Medical Foundation completes for Memorial Hospital will be discontinued July 1, said Dr. Luis Galup, president of the Foundation, who joined the organization in 1967. The pneumatic tubes will be turned off, and the Foundation employees and equipment that are located in the hospital will transfer to the Foundation's main building at 530 N. Lafayette Blvd. The Foundation, which already has implemented a hiring freeze and salary freeze, might face other financial hardships. "We'll have to go take some more drastic financial measures," Galup said, if the Foundation loses all $14 million it bills Memorial annually for its services. If the Foundation is able to retain a portion of its work for Memorial, its revenue loss might be about $7 million, Galup said. "I don't think it will jeopardize the future, but it may change what will be available to the community," he said, adding that the Foundation might have to cut back on the charitable work it provides. This week, Galup sent a letter to all 800 or so Foundation employees, and provided them with a copy of a 35-page operations review and financial analysis summary completed on Tuesday by Chi Solutions, Inc. of Ann Arbor, Mich. Chi Solutions is a laboratory management and consulting group hired by the Foundation last year. "We finally decided to do an overview of our operations since there were questions about how good our laboratory was," Galup said. "We felt the employees needed to know what was going on," he said about disclosing its contents to employees. Memorial's actions could jeopardize "a very valuable resource for the community." *** Memorial Health System is moving forward with building an in-house lab that will employ 50 and service its medical staff and patients. It has been forced into this move, said Diane Stover, vice president of the hospital. She said the Foundation has been unwilling to negotiate on the fee increase. "Their quality and service is great, and has been great, but at what cost? It all has to stay in balance," Stover said. "Their rates are more than 40 percent over the national norm to begin with," Stover maintains. And a 3 percent increase in pricing each year for five years, totals $20 million. "Why would you spend $20 million more on a service that all around the country doesn't cost that much?" she said. The Foundation maintains it charges Memorial the same as its other customers and that it needs the fee increase to avoid losing money. Memorial's new core lab will be located in the Centennial Building at the hospital complex in July. Later, the lab will be permanently moved to the first level of its Heart and Vascular Center, Stover said. Regardless of the outcome in negotiations, Stover said there will be no interruption in any lab work needed by the hospital or its patients. Dr. Duprat, president of the medical staff, said he would like to see the consultants in the same room with Memorial and Foundation administrators hammering out a new contract for pathology, blood bank and reference lab work. He hopes this happens. He hopes it happens soon. "There is no agreement, it is unresolved, and now," he said, "time is running out."Staff writer Heidi Prescott: hprescott@sbtinfo.com (574) 235-6070